Hong Kong Tax Compliance
-
Hong Kong enacted the ordinance to implement Pillar Two of the OECD's BEPS 2.0 framework on 6 June 2025 (effectively retrospectively from 1 January 2025). It imposes a global minimum tax of 15% on MNE groups, through two interlocking rules, namely:
Income Inclusion Rule (IIR) – the primary rule which imposes top-up tax on the parent entity of an in-scope MNE group in respect of its constituent entities which are taxed at an effective tax rate (ETR) below 15% (i.e. low-taxed constituent entities) outside the jurisdiction where the parent entity is located; and
Undertaxed Profits Rule (UTPR) – a backstop to IIR. Please note the implementation of UTPR in Hong Kong is currently postponed pending further announcement.
The two rules are together referred to as the Global Anti-Base Erosion (GloBE) rules. They seek to ensure that in-scope MNE groups (to be explained hereafter) pay a minimum tax of 15% in respect of the profits derived from every jurisdiction in which they operate.
The GloBE rules allow jurisdictions to introduce their own qualified domestic minimum top-up tax (QDMTT). Hong Kong has implemented the Hong Kong Minimum Top-up Tax (HKMTT), which gives Hong Kong the first priority to collect the top-up tax in respect of low-taxed Hong Kong constituent entities.
Key Details:
Reportable Entities: MNE groups with annual consolidated revenue of EUR 750 million or above in at least two of the four fiscal years immediately preceding the current fiscal year (i.e. in-scope MNE groups).
New Filing Obligation: Each Hong Kong constituent entity must file both an annual Top-up Tax Notification and a Top-up Tax Return to the IRD. Groups can streamline this by appointing a single Designated Local Entity to file on behalf of all local entities.
Filing Deadline: The Top-up Tax Notification must be filed with the IRD within 6 months after the end of the reporting fiscal year. The Top-up Tax Return must be filed within 15 months after the fiscal year-end (extended to 18 months for the first transition year).
-
Starting from YOA 2025/26, in-scope MNE groups generally must e-file their PTR. This is more demanding than the traditional paper filing method:
iXBRL Requirement: Supporting documents (Financial Statements and Tax Computations) must be converted into iXBRL data files (using IRD tools or specialised software) rather than just attaching PDF/Excel files.
Pillar Two Portal: Entities must register for this new portal using specific forms (IR1485) to obtain an MNE Group Code.
Strict Access: Filing requires specific digital certificates and accounts, which add complexity for especially non-resident directors to obtain.
-
CbC Reporting is a key part of Hong Kong's Transfer Pricing regime, implemented under local legislation in July 2018 in line with the OECD's Base Erosion and Profit Shifting (BEPS) Action 13 standard.
Key Details:
Reportable Entities: a MNE Group is required to file a CbC Report in relation to an accounting period where:
- the consolidated group revenue for the preceding accounting period is at least EUR750 million (or HK$6.8 billion); and
- the group has constituent entities or operations in two or more jurisdiction.
Filing Obligation: The primary filing obligation rests with the Ultimate Parent Entity (UPE) that is a Hong Kong tax resident. However, a secondary obligation may fall on another Hong Kong entity within the group if its foreign UPE fails to file a CbC Report in its home jurisdiction, subject to specific conditions being met.
Filing Deadline: The CbC Notification must be filed with the IRD via the CbC reporting portal within 3 months of the reportable group’s accounting period end. The CbC Return must be filed within 12 months after the same period end.
Additional Tax Compliance for MNE Groups
-
The PTR is a form used for reporting profits generated from a trade, profession, or business carried on in Hong Kong.
Purpose: Businesses (corporations and partnerships) use this form to declare their assessable profits and calculate their tax liability.
Key Details:
Form Types:
BIR51:
For corporations.BIR52:
For persons other than corporations (partnerships).BIR54:
For non-resident person’s business in Hong Kong.Key Principle: Hong Kong has a territorial source principle of taxation, meaning generally only profits arising in or derived from Hong Kong are assessable.
Filing Deadline: The Inland Revenue Department (IRD) issues Profits Tax returns in early April each year. While the standard filing deadline is one month from the date of issue, companies with appointed tax representatives could be typically granted an extension. The specific extended deadline is determined by the company's financial year-end date.
Tax Rate: A two-tiered profits tax rate regime exists, with 8.25% on the first HKD 2 million of profits and 16.5% on the remainder.
-
The ER (specifically Form BIR56A and related IR56 forms) is used by employers to report the total emoluments paid to their employees during a specific year of assessment.
Purpose: Employers must report details of their employees' salaries, allowances, bonuses, and other benefits to the IRD for salaries tax assessment purposes.
Key Details:
BIR56A:
The mandatory annual return to report employees’ remuneration (emoluments), issued by the IRD around April each year with a one-month filing deadline.IR56E:
To notify the IRD of a new employment (must be filed within 3 months of the employee's commencement date).IR56F:
To notify the IRD when an employee is about to cease employment (must be filed not later than 1 month before the cessation).IR56G:
To notify the IRD when an employee is about to leave Hong Kong (must be filed not later than 1 month before the employee's date of departure).
-
The ITR (specifically Form BIR60) is the comprehensive tax return form issued to individuals to declare their various sources of income.
Purpose: Individuals use this form to report income subject to salaries tax, property tax (if applicable), and profits tax (if applicable).
Key Details:
Filing Deadline: ITR forms (BIR60) are issued by the IRD in early May each year. Taxpayers must file within 1 month of receiving it. Individuals represented by a tax representative are typically granted an extension of an additional month.
Tax Assessment Mechanism: The reported income is assessed and taxed under the separate heads of Salaries Tax, Property Tax (if applicable), and Profits Tax (if applicable).
Personal Assessment: Personal Assessment is an option available to individuals that can provide tax relief by aggregating all income and applying progressive tax rates and allowances.
Joint Assessment: Joint assessment can be advantageous for a married couple if the assessable income of one spouse is less than his or her tax allowance.